Airbnb’s Impacts on Housing Affordability in Vancouver

The full report can be downloaded here.

Airbnb in Vancouver: An Overview

Airbnb is different from traditional house sharing and online bulletin boards. Airbnb offers a variety of financial services and insurance-like products to hosts and guests, maintains centralized control of all listings, and charges a 9-15% service fee on all bookings., The success of this business model has led to its valuation at 25.5 billion USD, soundly beating valuations for Hilton, Marriott, and Hyatt, while operating with little to no regulation or oversight.

Property owners convert affordable housing to unlicenced online hotels. Hosts who convert long-term rentals (LTR) to short term rentals
(STR) reduce the availability of affordable rental housing; in Vancouver these hosts also violate municipal bylaw. Because Airbnb conceals the location and identity of commercial hosts, it has proved difficult to impossible for municipalities to track violations or enforce restrictions on STRs. Unlike other businesses operating in Vancouver, there is no public record of where Airbnb’s operations are taking place, and no effective means to enforce Vancouver bylaw.

This report is intended to contribute reliable data to the debate about Airbnb’s Vancouver operations. An analysis of listing data suggests that while a slim majority of hosts are casual operators, the majority of Airbnb’s listings, bookings, and revenue appears to come from a minority of “commercial” hosts: property managers who list one or several full houses, apartments, and rooms on a long-term commercial basis. Some hosts even convert multiple houses for use as illegal hotels, generating hundreds of thousands of dollars in revenue. In spite of the rapid growth of the STR industry, there is little reliable data on when, where, and how often units are being rented, and how many suites are being removed from the LTR market. This report will attempt to model host activity on Airbnb and estimate the availability and utilization of STR units in Vancouver.

Municipal Bylaw and Airbnb

99.3% of listings advertised on Airbnb are for less than 30 days and, assuming that none include the 52 licenced bed and breakfasts, are in violation of municipal bylaw. Violations are difficult to prove and enforce because Airbnb conceals the identity of illegally operating businesses. In lieu of a confession or street-facing advertisement, it is nearly impossible for City inspectors to prove that a unit is being used as a STR. Additionally, hosts use a variety of online forums including a Facebook group and dedicated online forum to share advice and information on evading detection. Enforcement of existing bylaw may be desirable, but is not currently feasible.

A 2012 report on the City’s efforts to incentivize affordable housing development estimates that the City of Vancouver spent between $5,000 and $70,000 per unit to subsidize market rental housing. Every STR that would otherwise be used as LTR housing undermines the City’s efforts to increase the supply of affordable market rental housing in Vancouver.

How many Airbnb listings are there in Vancouver?

There were a total of 4,728 listings in Vancouver on 3 December 2015. Of these, 3,529 had at least one review, suggesting they have been rented, and 3,425 had been reviewed in 2015. For the purposes of this report, it is assumed that 3,425 are being actively rented as of December 2015.

How many Airbnb hosts live in their units?

Airbnb has repeatedly cited statistics emphasizing that the majority of listings are “casual” hosts, who rent out the house in which they live for supplemental income. In an April 2016 interview with the CBC, the head of Airbnb Canada, Aaron Zifkin, stated that “all of our hosts are occasional homesharers.” Both interviews with commercial hosts (hosts who advertise properties they do not live in) and an analysis of InsideAirbnb.com data demonstrates that this statement is either untrue or misleading.

The total number of housing units dedicated to full-time, commercial STR is predicted to be 1,811, compared with 1,614 casual, part-time units. Based on an estimate of median neighbourhood LTR prices, it is assumed that the total number of commercial housing units that have converted long-term rental housing to short-term rentals is equal to 1.6% of the total rental stock, and is equivalent to 1 in 14 secondary suites.

Rental units converted to STR is equal to 1.6%
of all rental housing, or 1 in 14 secondary suites

How much do STRs earn compared to LTRs?

Contrary to Airbnb’s public statements, the company is heavily reliant on professional full-time hosts. Casual part-time hosts who live in the units they rent may form a majority of hosts, but revenue from casual hosts is dwarfed by all other categories. It would appear that Airbnb’s core business is not casual hosts, but commercial operators using an anonymous online marketplace to circumvent local laws and regulations.

Tools for regulation

Large Commercial Hosts are heavily invested in Vancouver’s STR market, with top hosts managing dozens of units and generating six figures in revenue. In cities where STR has been legalized, commercial hosts have been largely non-compliant with registration requirements and maximum night bookings.

Existing Tools Available Without New Legislation

The City of Vancouver has a limited number of tools available to regulate Airbnb and other websites advertising illegal STRs. While more innovative regulations would require enabling legislation from the Province, the City has tools allowing it to take action against the worst offenders:

  • Liberalizing Vancouver’s Bed and Breakfast licence.
  • Enforcing
    the Zoning and Development bylaw restricting unlicenced STR.
Potential Tools Requiring Municipal Legislation

The City of Vancouver has a number of extraordinary powers enumerated in the Vancouver Charter. It does not, however, have all the tools available to other BC municipalities, such as resort communities, which have additional tools to generate affordable housing. As the STR industry evolves, it will be necessary to develop new tools to regulate it; nonetheless, it is critical to establish basic regulations and restrictions to control public nuisances and social harms created by certain types of STR.

  • Hosts interviewed for this study favoured a hotel tax for STR similar to San Francisco’s regulations. A hotel tax would contribute 8% of revenues to the Province, and 3% to Tourism Vancouver. A hotel tax would not offset the loss of rental housing. This option is not recommended as an effective option for reducing impacts on the availability of affordable housing.
  • Relaxations on STR could include setting a maximum number of days at 90 or 120 days. This option is recommended provided that a mechanism is developed to track STR units across platforms.
  • Multi-year prohibitions on units that have applied for a “no-fault eviction,”
    resulting from renovation or redevelopment. Amending Vancouver’s existing Tenant Relocation and Protection Policy to prohibit STR conversion in buildings that evict long-term tenants is recommended if the City intends to reduce redevelopment of existing rental stock for the purpose of STR conversion.
  • Any attempt to limit STR utilization of a particular unit requires registration and licensing of units to be rented, which has proven unsuccessful in other cities. This option is strongly recommended.
  • In order for Vancouver to successfully enforce existing or future zoning bylaw, the City needs the authority to fine platforms like Airbnb that knowingly advertise illegal STRs. This tool is recommended and necessary for any registration and licensing mechanism to be effective.
  • A new licensing program for non-traditional Bed and Breakfasts could introduce new annual fees to offset the costs of enforcement and fund the replacement of LTR units lost by conversion. The feasibility of an affordable housing fee scheme would have to be subjected to a thorough economic and legal analysis that is beyond the scope of this report. This option is recommended as the least restrictive means to reduce impacts on the availability of affordable housing.
Potential Tools Requiring Provincial Legislation

While many tools already exist to control and regulate STR in Vancouver, provincial cooperation would be a great asset in regulating STR in Vancouver. Essential to regulation would be a clear authority to fine platforms facilitating violations of municipal bylaw. Another tool would be a clear municipal authority to tax STRs, allowing Vancouver to develop innovative tools to allow Airbnb and similar services while mitigating their negative impacts on housing affordability.

Conclusions

Effective regulation of STR in Vancouver requires the ability to track hosts across platforms and across units. Both hosts and platforms must be held accountable for encouraging and facilitating illegal STR, and individual rental units must be registered and tracked. Until sites like Airbnb can be affirmatively held accountable to the communities and municipal governments in which they operate, any attempt to regulate STR in Vancouver will only legitimize Airbnb’s operations and undermine municipalities’ authority to regulate zoning and business within their borders.

 

Note: the original report was replaced with a prettier one with a fancy cover page.

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